TWENTIETH CENTURY FOX FILM CORPORATION, PETITIONER V. UNITED STATES
OF AMERICA
No. 89-661
In the Supreme Court of the United States
October Term, 1989
On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Second Circuit
Brief for the United States in Opposition
TABLE OF CONTENTS
Question presented
Opinions below
Jurisdiction
Statement
Argument
Conclusion
OPINIONS BELOW
The opinion of the court of appeals (Pet. App. 1a-21a) is reported
at 882 F.2d 656. The pertinent opinions of the district court (Pet.
App. 24a-35a, 36a-44a) are reported at 700 F. Supp. 1242 and 700 F.
Supp. 1246.
JURISDICTION
The judgment of the court of appeals was entered on August 9, 1989.
Pet. App. 22a-23a. By an order dated October 2, 1989, Justice
Marshall extended the time for filing a petition for a writ of
certiorari to October 24, 1989, and the petition was filed on that
date. The jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).
QUESTION PRESENTED
Whether the court of appeals correctly upheld the district court's
finding of criminal contempt against petitioner for willfully
disobeying an antitrust consent decree.
STATEMENT
After a bench trial in the United States District Court for the
Southern District of New York, petitioner was convicted on one count
of criminal contempt, in violation of 18 U.S.C. 401(3). Petitioner
was sentenced to pay a $500,000 fine and an additional $40,397 in
costs. The court of appeals affirmed the district court's finding of
criminal contempt but vacated the sentence and remanded for further
proceedings. Pet. App. 1a-21a. /1/
1. In 1938, the United States filed an antitrust action in the
United States District Court for the Southern District of New York
against petitioner Twentieth Century Fox Film Corporation and several
other major film distributors. The original complaint alleged that
petitioner and other film distributors had engaged in a variety of
practices that violated Section 1 of the Sherman Act, 15 U.S.C. 1.
Those practices included "block-booking," namely, "conditioning the
licensing of one film or group of films upon the licensing of one or
more additional films." Pet. App. 3a. After protracted litigtion, the
district court determined that petitioner's block-booking violated the
Sherman Act. United States v. Paramount Pictures, Inc., 66 F. Supp.
323, 348 (S.D.N.Y.), judgment entered, 70 F. Supp. 53, 72 (S.D.N.Y.
1946), aff'd in part and rev'd in part, 334 U.S. 131 (1948), on
remand, 85 F. Supp. 881 (S.D.N.Y. 1949), aff'd 339 U.S. 974 (1950).
In 1951, petitioner consented to the entry of a decree, Section II(7)
of which enjoins petitioner from engaging in block-booking. See
United States v. Loew's, Inc., (1950-1951) Trade Cas. (CCH) Paragraph
62,861, at 64,545-64,546 (S.D.N.Y. 1951). Pet. App. 3a-4a. /2/
In October 1988, petitioner and Leila J. Goldstein, the manager of
petitioner's Minneapolis/Indianapolis/Milwaukee branch office, were
indicted in the Southern District of New York on one count of criminal
contempt, in violation of 18 U.S.C. 401(3). The indictment alleged
that between 1985 and 1987, petitioner and Goldstein had willfully
disobeyed Section II(7) of the 1951 consent decree by engaging in
block-booking. Pet. App. 4a.
After a four-day bench trial in November 1988, /3/ the district
court found petitioner and Goldstein guilty of criminal contempt.
Pet. App. 24a-35a. The evidence, which consisted of testimony of
movie exhibitors, booking agents, and Goldstein's subordinates, showed
that Goldstein had repeatedly conditioned the licensing of some films
upon the licensing of other films, in plain violation of Section II(7)
of the consent decree. For example, "Fox employees * * * were
instructed not to accept any Mannequin play-dates unless the exhibitor
agreed to play Black Widow first." Id. at 5a. Goldstein's staff
dutifully carried out these instructions: the staff told one
independent booking agent that "he would have to play Black Widow
before he could play Mannequin," id. at 5a-6a; the staff told another
booking agent that "he would have to play Black Widow in order to keep
his Mannequin dates," id. at 6a. /4/ And Gloria Fennessey, one of
Goldstein's subordinates, once told an exhibitor who complained about
the block-booking practices: "I know it is illegal, but I have to do
my job." C.A. App. 373-374.
Having found that Goldstein, acting within the scope of her
corporate authority, willfully violated the consent decree, the court
determined that that finding established petitioner's criminal
liability as well. Pet. App. 34a. /5/ For that reason, the court
concluded that evidence concerning petitioner's corporate program for
compliance with the decree was not relevant to the firm's liability
for criminal contempt. Ibid.; see id. at 37a n.1.
In December 1988, the district court sentenced petitioner, a repeat
offender, /6/ to a fine of $500,000, and it assessed costs of $40,397.
Pet. App. 6a.
2. The court of appeals affirmed the district court's finding of
petitioner's criminal contempt but vacated the sentence and remanded
for further proceedings. Pet. App. 1a-21a; see note 1, supra. /7/
The court concluded that the consent decree "prohibits, with
unmistakable clarity, the practice of (block-booking)," Pet. App. 7a,
and that the "record amply demonstrates that Goldstein, a managerial
employee of (petitioner), willfully violated the consent decree while
acting within the scope of her authority," id. at 8a.
The court then rejected petitioner's argument that it could escape
liability by implementing a corporate compliance program. In the
court's view, that program, "however extensive, does not immunize the
corporation from liability when its employees, acting within the scope
of their authority, fail to comply with the law and the consent
decree." Pet. App. 8a. In light of "settled law that a corporation
may be held criminally responsible for antitrust violations committed
by its employees or agents acting within the scope of their
authority," the court refused "to establish higher standards of proof
for corporate violations of antitrust consent decrees than for
violations of the antitrust laws themselves." Id. at 8a, 9a.
ARGUMENT
1. Petitioner renews its contention (Pet. 6-12) that the district
court's contempt finding, based on principles of vicarious criminal
liability, may not stand where that court did not consider
petitioner's good-faith efforts to comply with the consent decree. In
light of the "inescapable fact that an artificial entity can only act
* * * through its individual officers or agents," Bellis v. United
States, 417 U.S. 85, 90 (1974), this Court has long recognized that
there is "no valid objection in law, and every reason in public
policy, why the corporation which profits by the transaction, and can
only act through its agents and officers, shall be held punishable * *
* because of the knowledge and intent of its agents to whom it has
intrusted authority to act," New York Central & H.R.R.R. v. United
States, 212 U.S. 481, 495 (1909); see also Wilson v. United States,
221 U.S. 361, 377 (1911). Under these settled principles, federal
courts have repeatedly held corporations criminally responsible for
employees' willful violations of the antitrust laws where those
employees were acting within the scope of their corporate authority.
/8/ Here, the record shows -- and petitioner does not now dispute --
that one of petitioner's branch managers, Leila J. Goldstein,
"flagrantly and repeatedly violated the (consent) decree" by engaging
in block-booking. Pet. App. 33a. Under established doctrine,
therefore, Goldstein's willful actions rendered petitioner criminally
liable.
Petitioner seeks to avoid that straightforward application of the
criminal law by pointing to its corporate compliance program -- a
program designed to ensure employee obedience to the consent decree.
But the Court long ago rejected a comparable claim of corporate
immunity in the New York Central & H.R.R.R. case, where the Circuit
Court had held the railroad criminally liable for the Elkins Act
violations of its employees despite the fact that "there is no
authority shown by the board of directors * * * for the criminal acts
of the agents of the company." 212 U.S. at 492. Firms, such as
petitioner, establish compliance programs precisely because
corporations, under settled principles of criminal law, are not immune
from liability for such employee misdeeds. If the program succeeds
and prevents employee violations, then the corporation benefits. If,
however the program does not succeed, the corporation must suffer the
consequences. /9/ As the court of appeals recognized, if the law were
now to accept petitioner's argument, "corporations could more easily
distance themselves from the wayward acts of their agents -- a
prospect that threatens the very authority of the court that criminal
contempt is designed to preserve." Pet. App. 10a.
2. Petitioner does not seriously dispute that under current law a
corporation may be held criminally liable for violating the antitrust
laws as a result of the wrongful acts of its employees. Nevertheless,
petitioner suggests (Pet. 7-12) that a different rule should obtain
when the legal command and obligation flow from a court order, such as
the 1951 consent decree, as opposed to a statute, such as the Sherman
Act. The court of appeals correctly rejected that proffered exception
to the law of vicarious criminal liability, noting that there is "no
reason to establish higher standards of proof for corporate violations
of antitrust consent decrees than for violations of the antitrust laws
themselves." Pet. App. 9a. Petitioner cites no supporting authority
for its novel proposition that a corporate compliance program may
excuse its criminal liability for violating a court order, nor does
the decision of the court below on this point conflict with the
decision of any other court of appeals.
In United States v. Greyhound Corp., 363 F. Supp. 525 (N.D. Ill.
1973), aff'd, 508 F.2d 529 (7th Cir. 1974), the courts considered the
corporate contemnors' efforts to comply with a decree only because the
contempt petition expressly charged that the corporation's failure
adequately to instruct its ticket agents as to decree compliance was
in itself a violation of the decree. See 363 F. Supp. at 543. As the
court of appeals recognized, the corporations' "failures to tell
(their) agents about the court's decision and order" were part of the
government's case-in-chief. Id at 556. In that situation, the courts
necessarily examined the reasonableness of the corporation's
compliance efforts, since the contempt citation charged the firm in
effect with failing to undertake steps to ensure compliance with a
complicated decree requirement. Moreover, the corporation's failure
to make good faith compliance efforts reflected willfulness on the
part of high-ranking corporate agents, quite apart from any willful
misconduct by lower-ranking employees. See 508 F.2d at 538. /10/ By
contrast, the indictment in this case did not challenge the adequacy
of petitioner's compliance program, and the evidence overwhelmingly
established that petitioner's employees willfully violated the plain
terms of the decree. The compliance program therefore did not bear on
the contempt charged or any element of the offense. /11/
Similarly, in United States ex rel. Porter v. Kroger Grocery &
Baking Co., 163 F.2d 168 (7th Cir. 1947), a case involving violations
of price regulations promulgated by the Office of Price
Administration, the court reversed the criminal contempt conviction
where the government had erroneously proceeded on the theory "that the
intent with which the overcharges were made was immaterial," id. at
172, and the record contained no evidence that the firm's employees
had deliberately or intentionally made any of the 191 alleged
overcharges, id. at 177. Again, the instant case is consistent with
Kroger Grocery since the record here contains ample evidence of the
missing ingredient there -- willful employee conduct in violation of
the decree. /12/ Thus, as the court of appeals correctly observed, no
case "stand(s) for the proposition that a corporate agent's willful
violation of a court order will not be imputed to the corporation
because of the corporation's reasonable diligence in attempting to
comply with the order." Pet. App. 10a n.2. /13/
3. Finally, petitioner contends (Pet. 12-18) that the court of
appeals "adopted a rule of liability at odds with the numerous
decisions of this Court establishing that 'only (t)he least possible
power adequate to the end proposed should be used in contempt cases.'"
Pet. 13 (quoting United States v. Wilson, 421 U.S. 309, 319 (1975)
(brackets in original)). That contention is meritless. The
requirement that, in enforcing compliance with a lawful order, a court
exercise "'the least possible power adequate to the end proposed'"
(Shillitani v. United States, 384 U.S. 364, 371 (1966) (quoting
Anderson v. Dunn, 19 U.S. (6 Wheat.) 204, 231 (1821)), applies to the
choice between civil and criminal contempt and the choice of
particular sanctions. See Shillitani, 384 U.S. at 371 & n.9. None of
the decisions cited by petitioner, see, e.g., United States v. Wilson,
421 U.S. 309 (1975); Shillitani v. United States, supra; Harris v.
United States, 382 U.S. 162 (1965); In re Michael, 326 U.S. 224
(1945); and Nye v. United States, 313 U.S. 33 (1941), suggests, let
alone holds, that a corporation may escape criminal contempt liability
by implementing a compliance program. Rather, each of those decisions
addresses procedural or substantive limitations on the exercise of the
contempt power that have no bearing on the novel defense proffered by
petitioner. /14/ Petitioner was provided all the protections ensured
by this Court's contempt decisions; its complaint is with the
well-settled substantive rules of corporate criminal liability, which
this Court has long embraced and has shown no inclination to change.
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
KENNETH W. STARR
Solicitor General
JAMES F. RILL
Assistant Attorney General
ROBERT B. NICHOLSON
JOHN P. FONTE
Attorneys
DECEMBER 1989
/1/ The court of appeals held that petitioner had been deprived of
its constitutional right to a trial by jury because the government
sought penalties exceeding $100,000. Pet. App. 15a. The government
has not sought further review of that aspect of the court of appeals'
judgment.
The government recently has told petitioner that, on remand, it
will not seek a fine greater than $100,000, and thus the case will not
need to be retried under the court of appeals' mandate.
/2/ That section specifically prohibits petitioner and its
employees "(f)rom performing or entering into any license in which the
right to exhibit one feature is conditioned upon the licensee's taking
one or more other features." United States v. Loew's, Inc.,
(1950-1951) Trade Cas. (CCH) Paragraph 62,861, at 64,546 (S.D.N.Y.
1951).
/3/ Before trial, the government and Goldstein stipulated that if
convicted, she should not be exposed to a penalty of more than six
months' imprisonment or a $5,000 fine; the parties thus agreed that
Goldstein's "petty" offense did not warrant a trial by jury. The
district court accepted that arrangement. The court rejected
petitioner's demand for trial by jury even though there was no
agreement as to the maximum penalty to which petitioner should be
exposed in the event of conviction. See Pet. App. 4a, 26a n.3; note
1, supra.
/4/ Goldstein also block-booked Johnny Dangerously with Flamingo
Kid and Cocoon with Prizzi's Honor. See Pet. App. 29a-30a.
/5/ In a pretrial ruling, the court concluded that "in the context
of a corporate defendant, a corporation can be held criminally liable
for the conduct of its managerial employees acting within the scope of
their authority, * * * even if such activities were against corporate
policy or specific instructions." Pet. App. 37a. The court thus held
that
proof beyond a reasonable doubt that a managerial employee of
(petitioner) willfully violated the consent decree while acting
within the scope of his or her authority establishes all the
necessary elements of criminal contempt against (petitioner).
Ibid. (footnote omitted).
/6/ In 1978, petitioner had entered a plea of nolo contendere to an
indictment charging a similar violation for block-booking; the court
sentenced petitioner to pay a fine of $25,000 and the costs of the
prosecution. See Pet. App. 35a.
/7/ The court of appeals affirmed Goldstein's conviction, rejecting
her claims that the government presented insufficient evidence, Pet.
App. 7a-8a, that venue was lacking in the Southern District of New
York, id. at 20a, and that the case should have been tried to a jury,
ibid.
/8/ E.g., United States v. Basic Constr. Co., 711 F.2d 570, 573
(4th Cir.) (per curiam), cert. denied, 464 U.S. 956 (1983); United
States v. Koppers Co., 652 F.2d 290, 298 (2d Cir.), cert. denied, 454
U.S. 1083 (1981); United States v. Hilton Hotels Corp., 467 F.2d
1000, 1004-1007 (9th Cir. 1972), cert. denied, 409 U.S. 1125 (1973).
/9/ See, e.g., United States v. Basic Constr. Co., 711 F.2d at
572-573; United States v. Hilton Hotels Corp., 467 F.2d at 1007;
United States v. American Radiator & Standard Sanitary Corp., 433 F.2d
174, 204-205 (3d Cir. 1970), cert. denied, 401 U.S. 948 (1971).
/10/ In Greyhound, the court order at issue required the
corporations' agents to quote "voluntarily and accurately" the rates
and services offered to the public by its competitors. 508 F.2d at
531 n.4. Both corporations' practices of offering differing services,
schedules, routes, and rates to various destinations rendered
extremely difficult the reviewing court's task of determining whether
the firms' failure to comply with the decree was willful. Neither the
district court nor the court of appeals made a finding that any ticket
agent knowingly violated the decree.
/11/ The strong evidence of willfulness on the part of petitioner's
agents also serves to distinguish Southern Ry. v. Brotherhood of
Locomotive Firemen, 337 F.2d 127 (D.C. Cir. 1964), on which petitioner
relies (Pet. 11). In that case, there was no evidence that the
railroad's employees willfully operated any train without the
requisite firemen. See id. at 135.
/12/ Petitioner suggests (Pet. 9-10 n.11) that the Kroger Grocery &
Baking Co. case may not be distinguished on that ground, because that
case did involve willful employee misconduct. That suggestion is
misleading; the court of appeals' reference to employee misconduct
concerned employees who were not involved with the overcharges at
issue in the case. See 163 F.2d at 176. In United States v.
Greyhound Corp., supra, the district court distinguished Kroger
Grocery on precisely that ground, observing that in that case "(t)here
was no evidence even suggesting that the acts were intentional." 363
F. Supp. at 555.
/13/ Cases such as Vertex Distrib., Inc. v. Falcon Foam Plastics,
Inc., 689 F.2d 885 (9th Cir. 1982), and Washington Metropolitan Area
Transit Auth. v. Amalgamated Trade Union, 531 F.2d 617 (D.C. Cir.
1976) (see Pet. 10-11), are inapposite. Those decisions involved
applications of the legal principle that diligence of compliance is
relevant in civil contempt proceedings. See Vertex Distrib., 689 F.2d
at 891-892; Washington Metropolitan Area Transit, 531 F.2d at 621.
But as the court of appeals explained, the differences between civil
and criminal contempt render those cases inapposite:
The purpose of civil contempt is remedial and coercive; it
thus makes sense to say, at least in some contexts, that if a
defendant is doing all it can to comply with a court order,
there may be little, if any, coercive purpose that civil
contempt sanctions could achieve. Criminal contempt, however,
serves the much different purpose of vindicating the court's
authority. * * * It serves to punish individuals or
corporations for past violations of a court order. Because of
this different purpose, the focus of criminal contempt is on the
willfulness of the violation. Once it is determined that the
corporate agent willfully violated a clear contempt order, the
corporation must bear responsibility.
Pet. App. 9a-10a (footnote and citation omitted).
Even in civil contempt cases, reasonable diligence alone will not
excuse a corporation's failure to comply with a decree. Rather, the
issue is generally whether compliance was possible. See United States
v. Rylander, 460 U.S. 752, 757 (1983); Badgley v. Santacroce, 800
F.2d 33, 36-37 (2d Cir. 1986), cert. denied, 479 U.S. 1067 (1987).
Petitioner has not contended that compliance with the consent decree
was impossible. To the contrary, compliance with the decree was a
relatively simple matter. The record confirms that petitioner
promptly put an end to Goldstein's wrongful conduct once it learned
that exhibitors had complained to the government. See C.A. App.
418-419, 453-454, 498-499.
/14/ In Shillitani v. United States, 384 U.S. 364 (1966), for
example, the Court held that conditional confinement under a civil
contempt order for failure to testify before a grand jury may not
extend beyond the term of the grand jury. Once the grand jury's term
expired, the Court reasoned, the contemnor lost the ability to comply
with the court's order to testify. Id. at 371-372. In United States
v. Wilson, 421 U.S. 309 (1975), and Harris v. United States, 382 U.S.
162 (1965), the Court addressed issues regarding the availability of
summary process in contempt prosecutions under Rule 42 of the Federal
Rules of Criminal Procedure. And in In re Michael, 326 U.S. 224
(1945), and Nye v. United States, 313 U.S. 33 (1941), the Court dealt
with the propriety of using the criminal contempt process as opposed
to the substantive criminal law to prosecute violations of court
orders.